If saving for retirement is one of your primary financial goals, like it is for many people, you may be wondering how much income you’ll need to live comfortably after you retire. One way to answer this question is to determine the average retirement income in the U.S. and then base your estimate on this. Show
The U.S. Census Bureau reports the average retirement income for Americans over 65 years of age as both a median and a mean. In the most recent data from 2019, the figures were as follows:
The Difference Between Mean and Median IncomeObviously, there’s a big difference in average retirement income based on whether you’re talking about the median or the mean number. The mean retirement income is about one-third higher than the median retirement income. So what’s the difference? Median retirement income is calculated by listing every retirees’ income in order, from lowest to highest. The number right in the middle — with half of retirement incomes higher and half lower — would be the median. Mean income is calculated by adding all retirement income and dividing this by the total number of U.S. retirees or households. According to statisticians, the median number is probably more representative of the actual average retirement income in the U.S. than the mean number. This is because households with higher retirement income tend to skew the mean calculation toward the high side. Breaking Down the Average Retirement Income in 2021Breaking down the data by retiree or household age reveals some interesting trends. In particular, the older the retiree or household, the less the average retirement income. Here are median and mean incomes for retirees in different age brackets, according to the U.S. Census Bureau’s Current Population Survey (CPS) Annual Social and Economic (ASEC) Supplement:
Note that the median retirement income for households aged 60-64 is nearly twice as much as the median retirement income for households aged 75 and over. The difference is even more stark for single retirees: According to the Pension Rights Center, half of all single Americans who are 65 years of age or over have an average retirement income of less than $24,224 per year. Keep in mind that these are national averages. However, the cost of living varies greatly from one area of the country to another so the averages aren’t necessarily useful for comparison unless they’re further broken down by region. For example, a median income of $54,000 for a retired 65-year-old couple living in the rural Midwest would probably allow for a more comfortable retirement lifestyle than the same income would for the same age couple living in a high-cost metropolitan area like New York City or San Francisco. Where Does Retirement Income Come From?There are four main sources of retirement income for most Americans:
How Much Retirement Income Will You Need?There’s no one-size-fits all answer to how much income will be sufficient in retirement. It will depend on what lifestyle you want to live and your anticipated expenses. But there are a few good “rule of thumb” to help you determine how much income you might need in retirement. A good place to start is to figure out what sources you expect to receive income from in retirement. Social Security? Pension plan? Distributions from a 401k or IRA? Rental income? Once you identify these sources, you can start to estimate how much you think you’ll be getting from each. Financial planners will usually recommend that you should plan on needing between 70% and 80% of your pre-retirement income in retirement. This reflects the fact that you will no longer have certain expenses associated with working like commuting, purchasing work clothes, and eating out for lunch. So, once you’ve estimated your anticipated yearly sources of income in retirement and how much you expect to get from each, see if it’s roughly 70%-80% of your working income. That’s usually a pretty good way to estimate if you are on the right track, but as we’ve discussed, everyone’s situation is unique, so it’s best to consult a financial advisor to establish a personalized plan for your retirement income. For more details on retirement income planning strategies, check out our recent article on the topic here. How to Boost Average Retirement IncomeHere are a few strategies to boost average retirement income.
Next Steps for YouFree, online tools can give you the confidence to ensure you’re headed to a financially secure retirement. Consider trying the Personal Capital Retirement Planner, which can help you assess and plan for your retirement income needs. Get Your Free Tools What is the average retirement income in the United States?What Is The Average Retirement Income In 2021. The U.S. Census Bureau data shows that the median retirement income for retirees 65 and older is $46,360 in 2020. The poverty rate for people aged 65 and older remained at 9.0 percent in 2020 (compared to 2019).
What is considered a good retirement income?What Is a Good Retirement Income? According to AARP, a good retirement income is about 80 percent of your pre-tax income prior to leaving the workforce. This is because when you're no longer working, you won't be paying income tax or other job-related expenses.
How much money do most people retire with?According to Northwestern Mutual's 2021 Planning & Progress Study, there are signs that Americans may be increasing their personal savings. The average personal savings increased by 10%: from $65,900 in 2020 to $73,100 in 2021. Likewise, the average retirement savings increased by 13%: from $87,500 to $98,800.
How much should a couple have when they retire?Retirement Savings Benchmarks for Married Couples
Financial experts say that a couple aged 60 with a dual income of $75,000 per year should have seven times their household income in their retirement account. This multiplies to a total of $525,000 saved.
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